Advance Paycheck

prepayment of salary

Obligations to repay can jeopardize the exemption status | Insights and incidents For example, many employer have incentives programmes for new recruits, such as a registration grant or a new hire grant. Under these schemes, sometimes the employer provides that the worker is obliged to pay back all or part of the registration benefit if the worker does not work by a certain date. An employer may also allow for the granting of a loan to the worker, but only if the worker works until a certain date. Several years ago, the Ministry of Labour ("DOL") published a report answering queries on the use of the Fair Labor Standards Act ("FLSA") for certain "incentive schemes" for chemists.

In the first programme there was an agreement under which pharmaceutical college graduate trainees received student grants for practical training, under which the student was granted the amount of each grant for each year of permanent contract as a full-time chemist. In the event that they withdrew or were dismissed before the end of an entire year, the beneficiaries were liable to repay the amount of the outstanding amount of the credit subtracted from the last paycheck.

A second programme included a one-time sign-up reward. Employee notice or dismissals within two years of the end of the period required them to pay back the incentive, and the amount would be subtracted from their last paycheck. Apothecaries were considered by the employers to be exempted from the FLSA rules on working hours.

DOL found that the incentives did not involve good faith credits or advance money so that they could be subtracted from the definitive pay cheques. They were ' conditional' and there was no fixed commitment to pay back as needed with real credits. According to DOL rules, an individual is not deemed to be remunerated on a pay scale if the remuneration is reduced due to "fluctuations in the level or amount of work performed".

" DOL took the view that the occupational exemption enjoyed by the pharmacist was affected by the deduction from salaries rule if the pharmacist remained unemployed for a certain period. DOL also noted that the incentives schemes create a significant probability of undue deduction on a broad front, although not all apothecaries would necessarily end up paying back the bonus or loan.

Consequently, the DOL took the view that the company's staff would not be eligible for the exemption granted'irrespective of whether they were actually deducted or whether they reduced pharmacists' salaries below the statutory miminum. "The DOL statement is particularly wide-ranging and concerns not only the exempted categorisation of workers from whose wage deduction allowances have been made, but all programme staff.

Nevertheless, the employer should assess its programmes and consider whether it is prudent to maintain a commitment to repay.

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